What I Learned In Economics Class

It’s been two weeks since I started the Marketing Management program at BCIT.

And of the 7 courses I’m taking, which includes marketing, business math, sales, communication, etc…

The most fascinating course introduction was economics.

Perhaps because it’s a field of study I never acquainted myself with before…

Or perhaps because Will’s (course instructor) teaching style matches very well with my style of learning. I learn best when I understand the ‘why’ behind the things I am told to learn and memorize, which Will does quite brilliantly after introducing a rather complex idea.

Enough personal story. Here’s what I found to be the most fascinating this week.

The Philosophy of Economics

Economics is the study of the ‘use’ of scarce resources to satisfy unlimited human wants.

Here are the premises to the discipline of economics:

• resources are scarce

• human desire is unlimited

• humans are inherently selfish

These assumptions about the world, human nature, and society are the bedrock of economics. Good thing they are universal truths since the beginning of human existence across all generations, cultures, and religious backgrounds.

This also explains why economics is such an interesting field of study everyone should learn.

Economics is the question of 'how’:

• How should we distribute scarce but necessary resources like food?

• How should we satisfy our never-ending fountain of desires as a community?

• How should we incentivize ourselves such that we can work to benefit not only ourselves but others too?

There are philosophical and ideological questions we must come to a consensus on, such as whether it’s right for the ‘winner’ to get all the bread or to leave some portions to the ‘non-winners’.

Based on the second premise, the winner might want the bread all for themself. Hence the government, a power that regulates unlimited human desire for the well-being of everyone. Scarcity necessitates regulation. If we had an unlimited supply of bread, then we wouldn’t need a government in the first place.

Then there is the market. The capitalist market is the most effective and efficient economic system that leverages the power of the selfishness of individuals and their desires. It’s not perfect, but it’s the one system that proved to work better than others.

The free market incentivizes all participating members to contribute to economic growth, that is, the well-being of everyone, in the most efficient and fulfilling way possible. By doing so one benefits another not out of good will but out of self-interest.

Adam Smith sums it up brilliantly in his quote:

The only reason the economy is based on self-interest rather than a moral good like benevolence is because self-interest is much more predictable than benevolence.

In other words, if given an option to take $1,000 for free or give it away, almost 100% of people will take it for themselves. Therefore, it makes sense to make this the default human behaviour and create a system accordingly.

Better yet, we can contribute to society by choosing to specialize in one thing.

If I specialize in making Korean dishes, then I can make a living by providing Korean dishes to the community. I don’t have to make my own pots and pans because somebody else specializes in that. I am happy to make money doing what I love, and the food-enjoyer is happy as well.

So all is bliss. Ideally speaking, the free market is a perfect system where everyone can contribute to society’s well-being by feeding their self-interests. No one would complain in this system, right?

But stats on mental health and the level of happiness argue otherwise. Even countries like Canada and US — two of the most prosperous countries in the world — are struggling with making everyone happy. Why is that?

My Two Cents on Economics

We must remember that the economy roots for efficiency for the whole rather than individual happiness.

Also, its job is to meet the necessary requirements of human desire. Happiness isn’t in the equation.

Therefore, we can’t rely on the economy to satisfy our innermost desires, but sometimes, we expect it to do so.

The economy looks at welfare, the minimum viable living standard that everyone believes as a fundamental human right. Hence the emphasis on specialization. The economy must run efficiently to provide everyone with enough resources.

But more often than not, we want to meet more than our basic needs. We want more than enough. We don’t want just Dempster’s plain bread. We want fresh-baked Parisian baguettes, focaccia from Italia, and on top some smooth butter made with pasture-raised cow milk.

So to earn more money to buy better bread, we are left with the only option to become more skilled at the specialization we choose — or is it?

This is the hamster wheel dilemma. To enjoy more, we must work more. And for a lot of us, working more simply doesn’t make enough money to enjoy the things we want to enjoy.

Here’s another question: should my pursuit of self-interest be discouraged as the economy goes down? If so, do I deserve to satisfy my desires more if the economy does well?

The biggest pitfall is, neither economic prosperity or recession result in happiness because human desire is unlimited. There is no finish line to this race.

In which case, the definition of economic success would be the attainment of life satisfaction independent of the ups and downs of the national/global economy.

To know the limitless abyss of human desire, and that resources are scarce.

To mature into a person who isn’t driven by self-interest but by the profound happiness that comes from benevolence.

To overcome myself and see what’s beyond.

To be free from the premises on which economics relies by realizing what ‘enough’ is for my life.

That is, in my opinion, is the definition of ‘rich’.